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FINANCE

Opel rescue summit planned for Tuesday

German Finance Minister Peer Steinbrück has called for a meeting between managers at carmaker Opel and the leaders of German states where the car maker has major production centres after the GM unit asked for help from the government.

Opel rescue summit planned for Tuesday
Photo:DPA

The meeting is scheduled for Tuesday, Steinbrück said late on Friday night from Washington where he is taking part in the world finance summit.

“We are dealing with it, that is right,” he said.

Opel became the first German car manufacturer to call for help on Friday when it approached the federal and state governments asking for state loan guarantees.

Rhineland-Palatinate minister president Kurt Beck said he thought Opel needed around a €1 billion in guarantees, while his North Rhine-Westphalia counterpart Jürgen Rüttgers told this weekend’s Welt am Sonntag newspaper he supported state help for the car industry.

“We will not let Opel go under… North Rhine-Westphalia will put forward guarantees along with the other states and the federal government,” he said, adding other help would be needed to keep the car industry afloat, but did not elaborate on what this might be.

The company has plants in these two states as well as Thuringia and Hesse.

Hesse state premier Roland Koch says his government will offer half a billion in guarantees, and that this will be processed on Wednesday.

This will affect not just Opel but its suppliers too, which together employ 50,000 people in Hesse alone.

Beck told ZDF’s news programme Heute on Friday evening that he had already spoken with the other state premiers of affected states and they were prepared to offer up to 40 percent of the guarantees, if the rest was met by the federal government.

Opel boss Hans Demant has stressed that the request for guarantees was only for the “theoretical case” that finance flows from the USA dry up.

There Opel’s US owner General Motors recently warned of a possible bankruptcy after recording a loss of billions and a collapse in turnover.

There are reports of supply problems in the USA with some insurers refusing to cover costs for parts supply, leading GM and Ford to rely on payment up front or hopes that suppliers might deliver without guarantee of payment.

ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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